Annual & Long-Term Incentive Program Design

Read about recent trends in annual and long-term incentive program design, including budgeting, selection of performance metrics, target setting, the role of discretion, vehicle mix, and the role of equity in talent retention.

The pressure is on to abandon once-popular equity vehicles, particularly stock options, which have taken the heat as a prime instigator of executive pay excess. The right LTI design for a given company should be based on a careful consideration of the needs and characteristics of the company, its shareholders and its employees. Read the entire article (PDF) written by Seymour Burchman and Blair Jones.
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Rather than following the trend of discarding stock options as the primary LTI vehicle, Procter & Gamble considered what role LTIs (and specifically stock options) should play for their people in the future. They used P&G’s business and people strategies as the basis for a balanced, full-scale review of their global LTI practices. Read the entire article (PDF) written by Blair Jones. Read more

In the wake of corporate scandals, increased regulation, and heightened institutional investor interest in board activity, we have seen a commensurate change in both pay levels and pay structure. This change reflects the greater time and effort required of board members, as well as the greater risk these individuals face. Read the entire article (PDF) written by Blair Jones. Read more

Many companies are now adopting or considering long-term incentive plans where value realized by participants is contingent on achievement of specific performance goals, which are often not based on stock-price. While these types of plans provide opportunities to focus management on results that will drive shareholder value, they don’t come without significant risk of unintended consequences. Read the transcript of Roger Brossy and Richard Semler as it appeared in the WorldatWork Society of Certified Professionals Member Chat. Read more

For the last decade, the toughest question many companies faced about long-term compensation was: "How many stock options should we give out, and to whom?" Today, we are in the midst of unprecedented change in every aspect of long-term and stock compensation, and plans and practices need to be examined in light of new accounting rules, increasing shareholder scrutiny, and changing employee attitudes. As U.S. companies review their current stock option or other long-term compensation plans, the tried and true assumptions on what's right or even what works are already problematic at best. Companies need to plan how to adapt now, or evolution is likely to pass them by. Read the entire article (PDF) written by Roger Brossy and Richard Semler. Read more

Explore a number of tried and true solutions as well as creative new solutions for designing an equity incentive program that emphasizes performance and motivates employees through better line-of-sight. Includes a comparative review of various equity incentive structures, encompassing strategic goals and design considerations, tactical considerations, as well as the cost of those solutions. Read more

Momentum is building to require expensing of stock options. Companies cannot afford to merely participate in the debate - they should begin thinking now about how they might change their reward strategies if options become an income statement expense. Read the entire article (PDF) written by Richard Semler. Read more